Does debt maturity influence productivity?

Ryota Nakatani

Economics Bulletin, 2023, vol. 43, issue 1, 116 - 136

Abstract: Using firm-level data for seven European and Asian countries over a span of 20 years, this study investigates whether debt maturity influences productivity. Long-term debt is associated with lower productivity for small and medium-sized enterprises (SMEs), whereas larger firms succeed in using long-term financing for productivity improvement. Conversely, short-term debt is also associated with higher productivity. These results can be explained by (i) the moral hazard effects of long-term debt stemming from the less intense monitoring of firm performance and fewer liquidation fears, and (ii) the disciplinary effects of short-term debt to improve short-term performance, such as facilitating access to more productive technologies. As the financial market develops, the positive disciplinary effects of short-term debt on productivity weaken, whereas the negative moral hazard effects of long-term debt dissipate.

Keywords: Debt maturity; Productivity; Financial development; SMEs; Service industry (search for similar items in EconPapers)
JEL-codes: D2 G3 (search for similar items in EconPapers)
Date: 2023-03-30
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Citations: View citations in EconPapers (8)

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